The DCIT, Cent. Circle-1(1)(2), Surat V. M/s. J.B.& Brothers Pvt. Ltd., Maharashtra

ITA 102/SRT/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8646 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 08-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRASENJIT SINGH LD
• Assessee Lawyers: KK SHAH
• Keywords: Depreciation; Business expenditure; Earning of tax free income; Unabsorbed depreciation; Rule 8D; Set aside
• Section: 14A; 80IA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI V. DURGA RAO, HONBLE JUDICIAL MEMBER & SHRI O.P.MEENA, HONBLE ACCOUNTANT MEMBER ITA NOS. 102 & 103/SRT/2017 (ASSESSMENT YEARS : 2013-14 & 2014-15) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(2), SURAT - 395001 V S . M/S.J.B.BROTHERS PVT LTD., 702-03-04, PRASAD CHAMBERS, OPERA HOUSE, MUMBAI 400 004. (PAN: AACCJ 1569 J) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.K.SHAH - CA DEPARTMENT BY : SHRI PRASENJIT SINGH LD.CIT-DR DATE OF HEARING : 08/07/2019. DATE OF PRONOUNCEMENT : 12/07/2019. O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: 1. THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-1, SURAT, DATED 12.06.2017 FOR THE ASSESSMENT YEARS 2013-14 AND 2014-15. 2. IN BOTH THESE APPEALS, FACTS AND CIRCUMSTANCES ARE SAME. THEREFORE, THESE WERE HEARD TOGETHER. FIRST, WE ARE TAKING THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2013-14. 2 ITA NOS.102 & 103 /SRT/2017 (J.B.BROTHERS) ITA NO.102/SRT/2017 FOR A.Y. 2013-14 : 3. GROUNDS RAISED BY THE REVENUE IN ITA NO.102/SRT/2017 READ AS UNDER : 1. WHETHER, ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAWS, THE LD CIT(A) WAS JUSTIFIED IN HOLDING THAT DEDUCTION UNDER SECTION 80IA OF RS.1,92,34,634/- SHOULD BE ALLOWED BY IGNORING THE LOSSES OF ELIGIBLE UNIT OF YEARS EARLIER TO THE INITIAL YEAR OPTED? 2. WHETHER ON THE FACT AND THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS.1,92,34,634/- IN RESPECT OF 80IA OF THE I.T.ACT WITHOUT APPRECIATING THE FACT THAT IF ALL WINDMILLS WERE CONSIDERED AS ONE UNDERTAKING AND PROFIT AND LOSS OF ALL WINDWILLS ARE WORKED OUT AFTER ADJUSTING THE LOSSES FROM THE PROFIT OF THE UNITS, THE NET RESULT CAME TO LOSS. 3. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE AND LOW, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE IN RESPECT OF 80IA OF THE I.T.ACT WITHOUT APPRECIATING THE FACT THAT AS PER SECTION (5) OF SECTION 80IA FOR THE PURPOSE OF COMPUTATION OF THE DEDUCTION, IT HAS TO BE ASSUMED THAT THE ONLY SOURCE OF INCOME OF THE ASSESSEE IS THE ELIGIBLE BUSINESS. THE INCOME OR LOSS OF THIS BUSINESS ALONE IS TO BE CONSIDERED AS IF THAT WERE THE ONLY SOURCE. 4. WHETHER, ON THE FACT AND CIRCUMSTANCES OF THE CASE AND IN LAWS, LD.CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO U/S 14A OF THE IT ACT WITHOUT APPRECIATING THE FACTS THE AO HAS RIGHTLY APPLIED SECTION 14A R.W.R. 8D IN THE CASE AND MADE THE DISALLOWANCE OF RS.5,01,943/- ACCORDINGLY? 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE FACTS AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE ON ACCOUNT OF COMMISSION EXPENSES AMOUNTING TO RS.12,52,434/- WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE HAS FOLLOWED MERCANTILE METHOD OF ACCOUNTING AND AS PER MERCANTILE METHOD, INCOMES AND EXPENSES ARE TAKEN INTO ACCOUNT AS AND WHEN THERE ARISES A RIGHT TO RECEIVE OR RIGHT TO PAY? 6. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE FACTS AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE ON ACCOUNT OF STAFF WELFARE EXPENSES AMOUNTING TO RS.2,98,895/- (50% OF TOTAL DISALLOWANCE) WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE COULD NOT ESTABLISH THE CONDITIONS LAID DOWN U/S.37 OF THE I.T.ACT? 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 8. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.CIT(A) MAY BE SET ASIDE AND THAT OF ASSESSING OFFICE MAY8 BE RESTORED TO THE ABOVE EXTENT. 4. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSING OFFICER HAS NOTED THAT FOR THE SAKE OF COMPUTATION OF INCOME IT IS SEEN THAT THE 3 ITA NOS.102 & 103 /SRT/2017 (J.B.BROTHERS) ASSESSEE COMPANY HAD CLAIMED OF DEDUCTION OF RS.1,92,34,634/- U/S.80IA OF THE ACT. THE ASSESSING OFFICER NOTED THAT THE PROFIT FROM ELIGIBLE BUSINESS OR UNIT FOR THE PURPOSE OF DETERMINATION OF THE QUANTUM OF DEDUCTION U/S.80IA OF THE ACT HAS TO BE COMPUTED AFTER REDUCING THE NOTIONALLY BROUGHT FORWARD UNABSORBED LOSSES FROM THE PAST YEARS AND UNABSORBED DEPRECIATION OF ELIGIBLE BUSINESS RELATION TO PAST YEARS, EVEN THOUGH THEY HAVE BEEN SET OFF AGAINST OTHER INCOME IN EARLIER YEARS AGAINST INCOME FROM BUSINESS (OTHER THAN ELIGIBLE BUSINESS) AND IN DOING SO THE ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 80IA(5) FOR RS.1,92,34,634/-. 5. ON APPEAL, THE LD.CIT(A) BY FOLLOWING THE DECISION OF THE ASSESSEES OWN CASE FOR EARLIER YEARS IN THE A.Y. 2012-13 DIRECTED THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE U/S.80IA(5) OF THE ACT. 6. ON BEING AGGRIEVED, THE REVENUE HAS CARRIED THE MATTER BEFORE THE TRIBUNAL. THE LD.DEPARTMENTAL REPRESENTATIVE HAS RELIED ON THE ORDER PASSED BY THE ASSESSING OFFICER. THE ASSESSEE STRONGLY PLACED RELIANCE ON THE ORDERS OF THE CITS AND ALSO ASSESSEES OWN CASE FOR THE A.Y. 2012-13 AND ALSO THE DECISION OF THE HONBLE 4 ITA NOS.102 & 103 /SRT/2017 (J.B.BROTHERS) SUPREME COURT IN THE CASE OF ACIT VS. VELAYUDHASWAMY SPINNING MILLS (P) LTD., [2017] 244 TAXMAN 58 (SC). 7. WE HAVE HEARD THE BOTH THE PARTIES AND GONE THROUGH THE RECORDS AND ORDERS OF THE AUTHORITIES BELOW. THE VERY SAME ISSUE CAME UP FOR CONSIDERATION BEFORE THE HONBLE ITAT IN THE ASSESSEES OWN CASE FOR A.Y. 2011-12 IN ITA NO.1751/AHD/2013 BY ORDER DATED 23.10.2017 HAS CONSIDERED THE ISSUE. THE TRIBUNAL BY FOLLOWING THE ASSESSEES OWN CASE FOR A.Y. 2010-11 IN ITA NO.1749 & 1750 OF 2013 DATED 08.06.2017 AND ALSO BY FOLLOWING THE JUDGMENT OF THE HONBLE HIGH COURT OF MADRAS THE CASE OF ACIT VS. VELAYUDHASWAMY SPINNING MILLS (P) LTD., 341 ITR AGAINST THE VERY SAME JUDGMENT OF THE HONBLE MADRAS HIGH COURT THE REVENUE CARRIED THE MATTER IN APPEAL BEFORE THE HONBLE SUPREME COURT. THE HONBLE SUPREME COURT DISMISSED THE SLP(SUPRA). THE TRIBUNAL HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. FOR THE SAKE OF CONVENIENCE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER : FURTHER, ALTHOUGH ON IDENTICAL FACTS AND GROUNDS RAISED BY APPELLANT COMPANYS CASE FOR ASSESSMENT YEAR 2011-132 DISALLOWANCE OF DEDUCTION U/S.80IA(4) WAS UPHELD BY MY PREDECESSOR VIDE APPELLATE ORDER [APPEAL NO. CIT(A)- II/CC.1/139/2012-13 DATED 10.05.2013]. HOWEVER, IN VIEW SUBSEQUENT DECISION OF ITAT, AHMEDABAD AND CBDT CIRCULAR AND MY OWN DECISION IN ASSESSEES OWN CASE IN THE A.Y. 2012-13. I HOLD THAT THE CLAIM OF THE APPELLANT FOR DEDUCTION OF RS.1,92,34,634/- IS WELL WITHIN THE SPIRIT OF THE LAW AND ACCORDINGLY I HEREBY DIRECT THE AO TO ALLOW THE CLAIM FOR DEDUCTION OF RS.1,92,34,634/- MADE BY THE APPELLANT COMPANY U/S.80IA(4) OF THE ACT. THE APPELLANTS GROUND NO.1 IS ALLOWED. 5 ITA NOS.102 & 103 /SRT/2017 (J.B.BROTHERS) 8. WE, THEREFORE RESPECTFULLY FOLLOWING THE CO-ORDINATE BENCH OF THE TRIBUNAL, THE ASSESSEES OWN CASE (SUP) AND ALSO BY FOLLOWING THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT THE CASE OF ACIT VS. VELAYUDHASWAMY SPINNING MILLS (P) LTD.,(SUP) WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD.CIT(A), THEREFORE GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 9. GROUND NO.4 RELATES TO DISALLOWANCE U/S.14A OF THE ACT. 10. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAD NOTED THAT THE ASSESSEE HAS CLAIMED INTEREST EXPENSES OF RS.7,99,24,820/- WHICH INCLUDES GENERAL INTEREST OF RS.1,68,53,718/- REMAINING INTEREST / BANK INTEREST CONSIDERED AS DIRECTLY RELATED TO THE EXPORT / IMPORT. THE ASSESSING OFFICER HAS FURTHER NOTED THAT THE ASSESSEE DID NOT MAKE ANY DISALLOWANCE U/S.14A OF THE ACT. THE ASSESSING OFFICER HAS ASKED THE ASSESSEE WHY DISALLOWANCE U/S.14A IS NOT MADE AS COMPANY OWN CAPITAL RESERVES MORE THAN INVESTMENTS GIVEN RISE TO EXEMPTED INCOME. THE ASSESSEE HAS NOT FILED ANY DETAILS BEFORE THE ASSESSING OFFICER. THEREFORE, THE ASSESSING OFFICER BY INVOKING SECTION 14A R.W.RULE 8D OF THE IT RULES HAD DISALLOWED THE AMOUNT OF RS.5,01,943/-. THE WORKING OF THE ABOVE DISALLOWANCE GIVEN BY THE ASSESSING OFFICER AS UNDER : 6 ITA NOS.102 & 103 /SRT/2017 (J.B.BROTHERS) II A FINANCIAL EXPENSES 1,68,53,718/- B AVERAGE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT FORM PART OF TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND LAST DAY OF THE PREVIOUS YEAR. 8,05,65,885/- C AVERAGE OF TOTAL ASSETS AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. 13,69,98,49,110/- A X B C 1,68,53,718 X 8,058,65,88= 99,113/- 13,69,98,49,110 III AMOUNT EQUAL TO HALF PERCENT OF THE AVERAGE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT FORM PART OF TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR TOTAL 5,01,943/- 11. ON APPEAL, THE LD.CIT(A) GAVE A FINDING THAT THE ASSESSEE IS HAVING A SHARE CAPITAL + RESERVES OF 436 CRORES AS ON 31.03.2013 AS AGAINST INVESTMENT IN SHARES / SECURITIES GENERATING EXEMPT INCOME WAS ONLY 8.05 CRORES. THE LD.CIT(A) FURTHER GAVE A FINDING THAT THE ASSESSEE IS HAVING A OWNED FUNDS TO THE TUNE OF 436 CRORES. THEREFORE, IT HAS TO BE PRESUMED THAT OWN FUNDS ARE USED FOR MAKING INVESTMENT YIELDING TO EXEMPT INCOME. FURTHER, ABOVE PROPOSITION HE HAS RELIED ON THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. TORRENT POWER LTD., [2014] 363 ITR 474 (GUJ) AND ALSO CIT VS. HITACHI HOME & LIFE SOLUTIONS (I) LTD., [2014] 221 TAXMAN 109 (GUJ) DIRECTED THE ASSESSING OFFICER TO DELETED THE ADDITION. WE FIND FROM THE ORDER THAT THE LD.CIT(A) THAT THE ASSESSEE IS HAVING A 7 ITA NOS.102 & 103 /SRT/2017 (J.B.BROTHERS) OWNED FUNDS TO THE EXTENT OF 436 CRORES AS ON 31.03.2013 INVESTMENTS MADE BY THE ASSESSEE TO GENERATE THE EXEMPT INCOME ONLY TO THE EXTENT OF 8.05 CRORES. THEREFORE, THE LD.CIT(A) REASONABLE PRESUMED THAT ASSESSEE HAS INVESTED ONLY OWN FUNDS NO BORROWED FUNDS. BY CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THERE IS NO ERROR PASSED IN THE ORDER PASSED BY LD.CIT(A), THEREFORE GROUND RAISED BY THE REVENUE IS DISMISSED. 12. GROUND NO.5 IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER NOTED THAT THE COMMISSION AMOUNT OF RS.12,52,434/- WAS IN RESPECT OF TURNOVER OF EARLIER YEARS AND THEREFORE THE SAME WAS TO BE DISALLOWED. THE ASSESSEE HAS EXPLAINED BEFORE THE ASSESSING OFFICER THAT THE COMMISSION EXPENDITURE ACCOUNTED FOR AS AND WHEN DEBIT NOTE IS RAISED BY THE BROKER. THE ASSESSING OFFICER HAS NOT SATISFIED BY THE EXPLANATION GIVEN BY THE ASSESSEE AND THEREFORE HE HAS DISALLOWED THE ENTIRE AMOUNT OF RS.12,52,434/-. 13. ON APPEAL, THE LD.CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE HAS INCURRED THE EXPENSES, THE ASSESSING OFFICER HAS NOT DOUBTED THE GENUINENESS OF THE EXPENDITURE. THIS EXPENDITURE HAS TO BE ALLOWED EITHER CURRENT YEAR OR PREVIOUS YEAR. 8 ITA NOS.102 & 103 /SRT/2017 (J.B.BROTHERS) 14. ON APPEAL, THE LD.DEPARTMENTAL REPRESENTATIVE (DR) STRONGLY SUPPORTED THE ORDERS PASSED BY THE ASSESSING OFFICER AND ALSO SUBMITTED THAT THE GENUINENESS OF THE EXPENDITURE IS NOT THE ISSUE AND SUBMITTED THAT THE EXPENDITURE INCURRED BY THE ASSESSEE RELATES TO EARLIER YEAR NOT CURRENT YEAR. 15. ON THE OTHER HAND, THE LD.COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER PASSED BY THE LD.CIT(A). 16. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE RECORDS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE CASE OF THE ASSESSEE IS THAT THE ASSESSEE HAS PAID BROKERAGE TO THE EXTENT OF RS.12,52,434/- AND SUBMITTED BEFORE THE ASSESSING OFFICER THAT AS AND WHEN DEBIT NOTE IS RAISED BY THE BROKER, THESE EXPENSES WILL BE PAID. THIS EXPENDITURE FILED BY THE ASSESSEE HAS NOT EXPLAINED BY THE ASSESSING OFFICER FOR THE REASON THAT WHEN THE EXPENSES APPROVED AT THE TIME THE COMPANY HAS TO MAKE A PROVISION FOR EXPENSES OR DEBIT THE SAME IN THE BOOKS OF ACCOUNTS. HOWEVER, THE SAME WAS NOT DONE BY THE ASSESSEE, THEREFORE ENTIRE INCURRED BY THE ASSESSEE WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 9 ITA NOS.102 & 103 /SRT/2017 (J.B.BROTHERS) 17. ON APPEAL, THE LD.CIT(A) GAVE A FINDING THAT THE EXPENSES INCURRED BY THE ASSESSING OFFICER IS NOT DOUBTED BY THE ASSESSING OFFICER AND ONLY CASE OF THE ASSESSING OFFICER IS THAT THESE EXPENSES RELATES TO EARLIER YEARS NOT RELATED TO CURRENT YEAR. WE FIND THAT THE LD.CIT(A) AFTER CONSIDERING THE DETAILED EXPLANATION GIVEN BY THE ASSESSEE AND ALSO OBSERVATIONS MADE BY THE ASSESSING OFFICER GAVE A FIND THAT THESE EXPENSES ARE GENUINE AND HAS TO ALLOWED EVEN IN CURRENT YEAR ALSO. WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD.CIT(A), THEREFORE THIS GROUND RAISED BY THE REVENUE IS DISMISSED. 18. GROUND NO.5 RELATES TO WELFARE EXPENSES. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS NOT FULLY VOUCHED AND SOME OF THE EXPENSES WERE SUPPORTED BY THE HANDMADE VOUCHERS NOT HAVING COMPLETE ADDRESS AND NAMES OF THE RECIPIENT. THE ASSESSING OFFICER HAS ASKED THE ASSESSEE TO EXPLAIN AND SUBMIT BEFORE THE ASSESSING OFFICER THAT THE EXPENSES ARE GENUINE IN NATURE, THEREFORE REQUESTED THE ASSESSING OFFICER TO ALLOW THE SAME. THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, HE HAD MADE ADHOC DISALLOWANCE @ 10 ITA NOS.102 & 103 /SRT/2017 (J.B.BROTHERS) 15% OF SUCH EXPENSES WHICH WORKS OUT TO RS.5,87,790/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 19. ON APPEAL, THE LD.CIT(A) RESTRICTED THE DISALLOWANCE TO 50% WHICH WORKS OUT TO RS.298,895/- AND GRANTED PARTLY RELIEF TO THE ASSESSEE. 20. BEFORE US, THE LD.DEPARTMENTAL REPRESENTATIVE HAS RELIED ON THE ORDERS PASSED BY THE ASSESSING OFFICER AND AUTHORISED REPRESENTATIVE HAS RELIED ON THE ORDERS PASSED BY THE LD.CIT(A). 21. WE HAVE HEARD BOTH SIDES AND GONE THROUGH THE MATERIAL ON RECORD, WE FIND THAT THE LD.CIT(A) HAS RESTRICTED THE ALLOWANCE TO THE TUNE OF 50% WHICH WORKS OUT TO RS.2,98,895/- AND PARTLY GRANTED THE RELIEF TO THE ASSESSEE. WE FIND NO REASON TO INTERFERE WITH THE ORDERS OF PASSED BY THE LD.CIT(A), THEREFORE THIS GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 22. GROUND NOS.7 & 8 ARE GENERAL IN NATURE AND NO ADJUDICATION REQUIRED. 23. IN THE RESULT, ALL GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. 11 ITA NOS.102 & 103 /SRT/2017 (J.B.BROTHERS) ITA NO.103/SRT/2017 FOR A.Y. 2014-15: 24. GROUND NO.1, 2 AND 3 ARE SIMILAR TO THE GROUND IN ITA NO.102/SRT/2017 GROUNDS 1, 2 AND 3 IN RESPECT OF 80IA(5) OF THE I.T.ACT. WE FIND THE FACTS AND ISSUES ARE COMMON, THEREFORE THE DECISION TAKEN IN THE ABOVE APPEAL SQUARELY APPLIES TO THE PRESENT APPEAL. THEREFORE, THESE GROUNDS NO.1, 2 AND 3 RAISED BY THE REVENUE ARE DISMISSED. 25. GROUND NO.4 IS SIMILAR TO THE GROUND NO.4 OF ABOVE ORDER, THEREFORE THIS GROUND OF APPEAL RAISED BY DEPARTMENT IS DISMISSED. 26. GROUND NO.5 IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS CLAIMED CERTAIN EXPENSES RELATED TO CONVEYANCE AND TRAVELING, MOTOR CAR EXPENSES, TELEPHONE EXPENSES, MEMBERSHIP FEE EXPENSES AMOUNTING TO RS.1,15,80,392/- BY COMPUTING THE ABOVE THE ASSESSING OFFICER HAS NOTED THAT ON PERUSAL OF THE DETAILS, IT IS SEEN THAT THE ABOVE EXPENSES ARE NOT FULLY VOUCHED AND SOME OF THE EXPENSES ARE SUPPORTED BY THE HANDMADE VOUCHERS AND OF THE PERSONAL NATURE. THE ASSESSING OFFICER HAS ASKED THE ASSESSEE TO EXPLAIN. 12 ITA NOS.102 & 103 /SRT/2017 (J.B.BROTHERS) 27. IN RESPONSE TO THE NOTICE, THE ASSESSEE HAS STATED THAT THE CLAIMED EXPENSES ARE PROPER AND GENUINE, LOOKING INTO THE VOLUME OF THE WORK THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE HE HAS OBSERVED THAT IN THE ABSENCE OF THE COMPLETE DETAILS, EVIDENCES, GENUINENESS OF THESE EXPENSES CANNOT BE EXAMINED AND SOME EXPENSES ARE PARTLY IN PERSONAL NATURE WHICH CANNOT BE DENIED AND THE REPLY OF THE ASSESSEE IS NOT CONVINCING, NOT ACCEPTED. ACCORDINGLY, THE ASSESSING OFFICER HAS DISALLOWED 15% OF THESE EXPENSES WHICH COMES TO RS.17,97,589/- AND THE SAME ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 28. ON APPEAL, THE LD.CIT(A) RESTRICTED THE DISALLOWANCE TO 10% OF SUCH EXPENSES AND ADDITION WAS CONFIRMED TO THE EXTENT OF RS.11,58,039/- GRANTED RELIEF OF RS.6,39,550/- PARTLY ALLOWED THE GROUND RAISED BY THE ASSESSEE. 29. ON APPEAL, BEFORE US, THE LD.DEPARTMENTAL REPRESENTATIVE(DR) RELIED ON THE ORDER PASSED BY THE ASSESSING OFFICER AND DR SUPPORTED THE ORDERS PASSED BY THE ASSESSING OFFICER. 13 ITA NOS.102 & 103 /SRT/2017 (J.B.BROTHERS) 30. THE LEARNED AUTHORISED REPRESENTATIVE RELIED ON THE ORDERS PASSED BY THE LD.CIT(A). 31. WE HAVE HEARD BOTH THE SIDES, WE FIND THAT THE ASSESSING OFFICER HAS DISALLOWED AN AMOUNT OF RS.17,97,589/- ON THE GROUND THAT THERE IS AN EVERY POSSIBILITY THAT THE ASSESSEE HAS INCURRED THE EXPENSES CLAIMED BY HIM ARE IN PERSONAL NATURE. 32. ON APPEAL, THE LD.CIT(A) RESTRICTED 15% TO 10% GRANTED RELIEF TO THE ASSESSEE TO THE EXTENT OF RS.6,39,550/-. WE HAVE CONSIDERED THE ASSESSMENT ORDER AND LD.CIT(A) ORDER, WE FIND THAT THE RELIEF GRANTED BY THE LD.CIT(A) BY RESTRICTING DISALLOWANCE 15 % TO 10% IS REASONABLE AND JUSTIFIED AND NO INTERFERENCE IS CALLED FOR. THEREFORE, GROUND RAISED BY THE REVENUE IS DISMISSED. 33. GROUND NO.6 RELATES TO DISALLOWANCE OF INTEREST FOR LATE PAYMENT OF SERVICE TAX AMOUNTING TO RS.5,12,435/-. 34. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOTED THAT THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF INTEREST PAID ON DELAYED PAYMENT OF SERVICE TAX IS IN PENAL NATURE. 14 ITA NOS.102 & 103 /SRT/2017 (J.B.BROTHERS) 35. BEFORE US, THE LD.CIT(A) IT WAS SUBMITTED THAT THE INTEREST PAID BY THE ASSESSEE IS NOT A PENAL IN NATURE IS COMPENSATE IN NATURE, THEREFORE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT JUSTIFIED. THE LD.CIT(A) BY CONSIDERING THE EXPENSES MADE BY THE ASSESSEE HE HAS OBSERVED THAT THE INTEREST PAID ON DELAYED PAYMENT OF SERVICE TAX LIKE EXCISE, CUSTOM OR SERVICE TAX WHICH ARE IN THE NATURE OF INDIRECT TAXES, THE SAME IS IN THE NATURE OF BUSINESS EXPENDITURE INCURRED IN THE COURSE OF BUSINESS, ACCORDINGLY HE HAS ALLOWED THE ENTIRE EXPENDITURE. 36. THE LD.DEPARTMENTAL REPRESENTATIVE HAS RELIED ON THE ORDER PASSED BY THE ASSESSING OFFICER. 37. THE AUTHORISED REPRESENTATIVE HAS STRONGLY SUPPORTED THE ORDER PASSED BY THE LD.CIT(A). 38. WE HAVE HEARD BOTH THE SIDES AND WE FIND THAT THE EXPENDITURE INCURRED TO THE ASSESSEE DURING THE COURSE OF THE BUSINESS AND THEREFORE WHICH HAS TO ALLOWED AS A BUSINESS EXPENDITURE. IN VIEW OF THE ABOVE, WE FIND NO REASON TO INTERFERE WITH THE ORDERS PASSED BY THE LD.CIT(A), THEREFORE GROUND RAISED BY THE REVENUE IS DISMISSED. 15 ITA NOS.102 & 103 /SRT/2017 (J.B.BROTHERS) 39. GROUND NO.7 RELATES TO DISALLOWANCE OF STAFF WELFARE EXPENSES. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS CLAIMED STAFF WELFARE EXPENSES AT RS.28,61,023/- IN THE PROFIT & LOSS ACCOUNT. ON PERUSAL OF THE DETAILS OF THE STAFF WELFARE EXPENSES, IT IS SEEN THAT THESE EXPENSES ARE NOT FULLY VOUCHED, SOME OF THE EXPENSES ARE SUPPORTED BY THE HANDMADE VOUCHERS WHICH ARE NOT HAVING COMPLETE NAME AND ADDRESS OF THE RECIPIENT. THE ASSESSING OFFICER HAS ASKED THE ASSESSEE TO EXPLAIN THE SAME. IN RESPECT TO THE NOTICES THE ASSESSEE HAS SUBMITTED THAT THE EXPENSES ARE PROPER AND GENUINE, LOOKING TO THE VOLUME ON THE WORK. HOWEVER, THE ASSESSING OFFICER HAS NOT SATISFIED WITH THE EXPENSES GIVEN BY THE ASSESSEE HE HAS DISALLOWED 15% OF THE EXPENSES WHICH COMES TO RS.4,29,150/- THE SAME IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 40. ON APPEAL, THE LD.CIT(A) HAS GRANTED RELIEF TO THE EXTENT OF RS.2,14,575/- AND PARTLY GRANTED RELIEF TO THE ASSESSEE. 41. WE HAVE HEARD BOTH SIDES WE FIND THAT THE LD.CIT(A) BY CONSIDERING THE ENTIRE BUSINESS CARRIED BY THE ASSESSEE AND ALSO BY CONSIDERING THE NATURE OF THE EXPENSES AND ALSO CONSIDERING THE 16 ITA NOS.102 & 103 /SRT/2017 (J.B.BROTHERS) EXPENSES INCURRED IN VARIOUS PLACES RESTRICTED THE ALLOWANCE TO 50% GRANTED RELIEF TO THE EXTENT OF RS.2,14,575/-. WE FIND THAT NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD.CIT(A), THEREFORE GROUND RAISED BY THE REVENUE IS DISMISSED. 42. GROUND NO.8 RELATES TO DISALLOWANCE ON ACCOUNT OF OFFICE EXPENSES RS.12,51,000/-. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE CLAIMED OFFICE EXPENSES OF RS.83,43,379/- IN THE PROFIT AND LOSS ACCOUNT. 43. ON PERUSAL OF THE DETAILS OF THE EXPENSES IT IS SEEN THAT EXPENSES ARE NOT FULLY VOUCHED ALL THE EXPENSES SUPPORTED BY THE HANDMADE VOUCHERS WHICH ARE NOT HAVING NAME AND ADDRESS OF THE RECIPIENT. THE ASSESSING OFFICER HAS ASKED THE GENUINENESS OF THE EXPENDITURE INCURRED BY THE ASSESSEE. 44. IT WAS SUBMITTED THAT THE EXPENSES INCURRED IN RELATION TO THE BUSINESS OF THE ASSESSEE. THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE HE HAD DISALLOWED 15% OF THE EXPENSES WHICH COMES TO 12,51,500/- THE SAME IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 17 ITA NOS.102 & 103 /SRT/2017 (J.B.BROTHERS) 45. ON APPEAL, THE LD.CIT(A) RESTRICTED DISALLOWANCE MADE BY THE ASSESSING OFFICER TO 50% GRANTED RELIEF TO THE EXTENT OF RS.6,25,750/- AND PARTLY ALLOWED THE GROUND RAISED BY THE ASSESSEE. 46. BEFORE US, THE LD.DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER. 47. ON THE OTHER HAND, THE COUNSEL FOR THE ASSESSEE HAS SUPPORTED THE ORDER PASSED BY THE LD.CIT(A). 48. WE HAVE HEARD BOTH THE SIDES AND WE FIND THAT THE CLAIM OF THE ASSESSEE IS THAT HE HAD INCURRED OFFICE EXPENSES IN RESPECT OF THREE OFFICE AT SURAT, DELHI AND MUMBAI AND FOUR DIVISIONS OF FACTORIES. MOST EXPENSES INCURRED BY THE ASSESSEE HAS SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE INCURRED BY THE CHEQUE WHENEVER PAYMENT MADE BY CASH, THE SAME IS SUPPORTED BY THE VOUCHERS. THE LD.CIT(A) BY CONSIDERING ALL THE FACTS AND EXAMINE THE DETAILS HE HAS RESTRICTED THE DISALLOWANCE TO THE EXTENT OF RS.6,25,750/-, WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD.CIT(A), THEREFORE GROUND RAISED BY THE REVENUE IS DISMISSED. 18 ITA NOS.102 & 103 /SRT/2017 (J.B.BROTHERS) 49. GROUND NOS.9 & 10 ARE GENERAL IN NATURE, THEREFORE NO ADJUDICATION IS REQUIRED. 50. IN THE RESULT, GROUNDS OF APPEAL IN GROUND NO.1 TO 10 RAISED BY THE REVENUE ARE DISMISSED. 51. IN THE RESULT, BOTH APPEAL FILED BY THE REVENUE IN ITA NOS.102/SRT/2017 AND 103/SRT/2017 ARE DISMISSED. 52. ORDER PRONOUNCED IN OPEN COURT ON THIS 12 TH DAY OF JULY, 2019. SD/- SD/- (O.P. MEENA) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12 TH JULY, 2019. S.GANGADHARA RAO, SR.PS /- COPY TO: 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT 4. THE CIT(A) 5. THE D.R. 6. GUARD FILE. BY ORDER / / TRUE COPY / / (ASSISTANT REGISTRAR) ITAT SURAT